The cryptocurrency market is bracing for potential turmoil as Ethereum (ETH) faces a significant downturn. Currently, ETH’s price is projected to fall by 20%, which could cause a staggering $336 million in decentralized finance (DeFi) liquidations. This alarming prediction comes from Kevin Rusher, a prominent figure in the fintech space and founder of the real-world asset lending platform RAAC.
The decline has been alarming, with ETH dropping below $4,000 since its high in December 2024. Rusher notes that if Ethereum’s price plunges to $1,857, it would trigger approximately $136 million in liquidations. A further dip to around $1,780 could lead to an additional $117 million being liquidated in loans. Clearly, investors and traders need to monitor these price levels closely to mitigate potential losses.
In his assessment, Rusher identified the root of this impending crisis as a $130 million ETH-backed loan within the Sky platform (formerly Maker) that is on the brink of collapse. Despite efforts from the borrower to provide more collateral, the threat of cascading liquidations looms large, highlighting the extreme volatility that crypto-backed loans often face. This crisis illustrates how interconnected and sensitive the DeFi ecosystem is to price fluctuations, with unexpected downturns leading to substantial losses.
With the current wave of selling pressure, Ethereum has also seen a drop in value against Bitcoin (BTC), further complicating the recovery outlook. Analysts are warning of a possible 30% decline against Bitcoin, raising concerns that Ethereum might establish a worrying support level around $1,600 if the downward trend persists. As ETH experiences a 15% decline in the past week alone, it has been trading significantly below its 200-day exponential moving average (EMA), which signals sustained weakness.
Technical indicators such as the relative strength index (RSI) currently sit at 31, nearing oversold conditions, which could suggest a potential reversal might soon occur. However, in light of Ethereum’s recent performance, market analysts are recommending a shift towards higher-performing altcoins. Trader Alex Krüger indicated that now could be the optimal time for ETH holders to reallocate their investments into more promising assets.
To mitigate the inherent volatility within the DeFi space, Rusher emphasizes the necessity of integrating real-world assets (RWAs) such as real estate and gold into the ecosystem. These assets generally feature more stable values and could provide a buffer against the kind of rapid price fluctuations that can trigger mass liquidations.
In conclusion, as Ethereum faces significant price pressures and potential liquidations loom, the market’s direction remains uncertain. Traders must remain vigilant and be prepared for the possibility of market shifts that could impact not just Ethereum but the entire DeFi landscape.
